What is Economics?

What do you think is the #1 source of conflict in our world’s history?

Imagine… A girl and her boyfriend get shipwrecked on a deserted island. After surveying the island they are pleased to find that it is full of plenty of fruits, nuts, small slow dumb animals and even wild corn. There are no animals or plants present that can threaten their health. They have an axe, a needle, and even some fish hooks.

Questions: How is their situation different from the one the rest of the world faces? What could happen that would threaten their ‘utopian’ life? Does anyone know the word for the fundamental problem that we all face?

The answer….. SCARCITY

Scarcity Definition: the condition that results from society not having enough resources to produce all the things people would like to have What would a homeless man want? What would a man with a small home want? What would a man who lives in a mansion want? How is the modern world’s definition of success not helping this fundamental economic problem? So…what might be the goal of an economist?

Economics Definition: the study of how people try to satisfy what appears to be seemingly unlimited and competing wants through the careful use of relatively scarce resources What is the difference between a need and a want?

Categorize the following into need or want: Food Gatorade Pizza Sodium Water Sun block Igloo Cadillac Escalade Love Gasoline A weapon Freedom Fire Which category is broader, want or need?

3 Basic Questions a Society Must Face

The Factors of Production The resources required to produce the things we would like to have, are… Land – “gifts of nature,” or natural resources not created by humans. Capital goods – the tools, equipment, machinery, and factories used in the production of goods and services Financial capital – the $ used to buy the tools and equipment used in production Labor – people with all their efforts, abilities, and skills Entrepreneurs – risk-takers in search of profits who do something new with existing resources

The Scope of Economics Key elements to the social science studying people and scarcity: Description, Analysis, Prediction Description: I’ve observed that although the price of many products in certain parts of the world (e.g. Costa Rica) are similar to the U.S., services are comparatively much less expensive. Analysis: How? And Why? Prediction: What might happen in the future?